We are thrilled to announce our newest $15 million investment in Connatix, and I am very honored to join Connatix’s Board of Directors. Connatix is performing exceptionally well, and we couldn’t be more excited to partner with them going forward.

So, what does Connatix do?

Quite simply, Connatix enables publishers to generate substantially more revenue from digital video through their industry-leading native video syndication and monetization platform (more on what that means in a bit).

Why does this matter?

It starts with the consumer. You and I are changing how we consume digital content. We are consuming more video every year. Our desire for video content is accelerating and has been for years. We are also consuming that video content predominantly on mobile. In short, we want that video seamlessly, in any and every form factor, rendered perfectly, when we want it. And, we only want quality, unobtrusive content. Our tolerance for any content that looks untrusted is gone. Simple enough, right?

Well, this creates a host of problems for digital publishers who now have to engage consumers with video content to stay relevant. Problem #1: not all publishers have video content and nearly all publishers don’t have enough video content. It’s hard to give consumers something you don’t have. Problem #2: video, especially on mobile, is technically difficult to deliver well. Provisioning, editing, and delivering video content for a myriad of different platforms, file formats, and bandwidth levels is exceptionally hard. Problem #3: many publishers don’t know how to efficiently monetize video. Even if you have video, and even if you can deliver it, if you don’t monetize it well, you’re leaving money on the table. Problem #4: any video content on your site has to be consistent with the look and feel of your site (e.g. “native”) or it will degrade the consumer experience and you will lose engagement, not gain it.

So, how does Connatix solve those problems for publishers?

If a publisher doesn’t have video content – Connatix has a market-leading syndication network where a publisher can selectively publish the highest quality video content from other publishers onto their site. If a publisher doesn’t know how to monetize video well – Connatix has a world-class monetization engine driving consistently superior video economics for their customers. If a publisher doesn’t have video infrastructure technology – Connatix provides a full-stack solution that can be implemented easily and renders all content natively. If a publisher has none of the above – no problem, Connatix’s end-to-end solution can take a publisher with literally no video content, no video monetization, and no video infrastructure and have them up and running in a day generating video revenue. And, even if a publisher already has all of the above, they can still work with Connatix to syndicate their content out to other publishers in Connatix’s network (ranked #2 in scale by Comscore) to generate even more revenue from their existing video assets. As customers like Time, Mashable, AOL, Tribune, CBS and many others have discovered, Connatix’s platform helps all publishers generate more revenue from the insatiable consumer demand for video content.

Why is Connatix such a great fit for Volition?

In all respects, Connatix represents exactly the type of company that we at Volition love. The company is led by a pair of brilliant founders, David Kashak and Oren Stern, who have the ambition to build a game-changing company. Connatix has a crystal clear value proposition for their publisher customers: more revenue. They have a best-in-class product that can be implemented in hours making it a no brainer for publishers. And as a result, the company has experienced significant triple digit top line growth while also having been bootstrapped and profitable since inception. When I first met David and Oren and heard them share the Connatix story, my first thought was – this is a Volition company. We are very excited that today that original thought is now a reality. To all of our friends at Connatix, welcome to the Volition family.

At Volition, we have often talked about how the Internet is changing the workflow for every company in every industry on the planet. For that reason, we have always loved investing in the disruptive companies that are transforming the workflow or supply chain of large existing markets with low technology adoption. That is why we invested in Chewy, which became the disruptive leader in the pet food retailing sector and was ultimately acquired for over $3 billion in what many have hailed as the largest e-commerce acquisition ever. We also invested in Globaltranz, which has become one of the leading technology-enabled freight brokerages and is on its way to $1 billion in annual revenue. Today, we are pleased to announce our newest investment which plays directly into this theme, Recycle Track Systems (RTS).

RTS, based in New York City, is a next-generation, technology-enabled commercial waste hauler – or as they like to say – a garbage company without trucks. The problem that RTS addresses is simple. Let’s say you’re a business that has trash and recycling pick-up needs, so you contract with a waste hauler for that service. Any variety of businesses have this need such as building owners, restaurants, hotels, grocery stores, universities, sports arenas, corporations, hospitals, etc. RTS has great customers across many of these categories. What we’ve come to appreciate is that many of these customers can experience service challenges because the level of technology adoption and data visibility in the waste management industry has lagged behind many other industries.

Practically, what problems arise for these businesses? Pick-ups are missed, which leads to trash being left out, often in violation of city regulations. There’s limited visibility into when trucks are coming for collection, which may require involvement from your facilities team. Despite you separating recycling and composting from traditional waste, your hauler doesn’t actually take this specialized waste to the right facilities – so there’s a lack of accountability. There’s no accurate tracking of recycling and composting to help you reach your stated sustainability goals. It’s hard to order additional pick-up of excess waste, due to the absence of on-demand services. The list goes on and on.

RTS aims to use technology and a deep commitment to service to bring a fundamentally higher-quality offering to its customers in the commercial waste management market. RTS’ model is to truly partner with independent waste haulers by providing them with a hardware/software solution for their trucks to enable better route management, tracking, scheduling and mobile app integration. Haulers within the RTS network then get increased revenue opportunities by being paired with blue chip customers within their region for both recurring and on-demand waste collection needs. RTS’ enterprise customers get greater service levels, transparency, visibility, reliability, accountability, and on-demand mobile capabilities for their waste management needs. It’s a business model where everybody wins.

We couldn’t be more excited to lead an $11.7M Series A financing in RTS, and I am very pleased to join the Board of Directors. We have gotten to know the founders, Greg Lettieri and Adam Pasquale, over the past year, and we have deep respect for their vision, passion, and commitment to service. We are extremely impressed with the quality of customers they have been able to win as a young company in a mature industry. We love the fact that the commercial waste management industry is huge, since any and every business you see has waste collection needs and could be RTS customers. We are also intrigued by the fact that this market has had very low penetration of technology while being one of the most recurring and predictable markets in existence. It is a market that is ripe for a new technology-oriented leader to emerge with a differentiated commitment to high service, and we are proud to partner with RTS to become that next-generation leader in commercial waste management.

Today is a big day for Volition as we announce our latest fund, Volition Capital Fund III, with $250 million in capital commitments. This fund will have substantially the same strategy and focus as all of our prior funds – which we call small cap technology growth equity. We invest in high growth, principally bootstrapped, technology companies that are poised for market leadership. This is the same strategy that we have been executing on since Day 1. This strategy has been born from our collective experience over decades of investing, in up cycles and down cycles, with lots of success and lots of scar tissue. Our small cap technology growth equity strategy is not a marketing pitch – it’s our genuine, feel-it-in-our bones, part-of-our-DNA, belief about how to best steward the capital of our investors.

Nonetheless, we had to make an important decision with this fund. It was clear before our fundraising process even began that there was substantial demand from investors for what we do. If our primary goal was to be bigger, we probably could have raised a $500 million to $750 million fund – but it would have taken us away from our focus and who we are as a firm. Instead, we decided that bigger wasn’t our goal – our goal, as it has always been, is to be excellent at what we do. Our goal is to be the best small cap technology growth equity fund in the market – and ultimately, we decided that a $250 million fund would best suit that goal. So, we opted for a focused fund with a quick fundraising process – less than six weeks from opening the data room to a single close at our hard cap of $250 million all the while having the privilege to be able to add some of the most reputable investors in the industry to our LP roster.

As we look forward to deploying this new fund, Volition will continue to be a study in contrasts. Some folks at Volition refer to this as our yin and yang.

We will continue to be a conservative and aggressive firm. We are conservative in that capital preservation is baked right into the heart of our investment strategy. Quite plainly, we don’t like to lose money on any investment. However, we are an aggressive firm in that we will not make any investment that we don’t think has tremendous upside potential. If you’re with a Volition portfolio company today, it’s because we think your company can be an absolute home run. We are not just a conservative firm, nor are we just an aggressive firm. We strive to be both at the same time in equal proportion, and it’s that marriage which will help pave the way for unique success.

We will continue to be a creative and focused firm. We endeavor to be creative because you don’t generate great returns through commodity thinking. We have to think different to be better. We have to have differentiated ideas to have differentiated returns. We are committed to this belief. However, we are equally and deeply committed to focus because focus is the key to excellence. And our goal is to be excellent at small cap technology growth equity investing. We have complete clarity on who we are and, equally so, who we are not. Once again, we can’t just be abundantly creative without focus. And, we can’t just be abundantly focused without creativity. But, it’s the two together that is a foundational to our long-term excellence.

Finally, we will continue to be a firm that looks backwards and forwards at the same time. We look backwards to remind ourselves of the patterns of our success and to remind ourselves of the mistakes we aim to not repeat. We look backwards to remind ourselves every day of what got us here and to be consistent about who we are. Importantly and simultaneously, though, we look forwards with absolute certainty that the world of technology will change – change is the constant. We look forwards with the understanding that our pace of learning must exceed the accelerating pace of change that is endemic in technology markets. We look forwards with complete conviction that we can’t stand still – we must constantly grow as a firm and as investors. It’s this tension of looking backwards and forwards at the same time that we don’t just embrace as a firm, but is something we aim to thrive within.

This is who we have been and will continue to be as we take our next step forward with this fund.

We couldn’t possibly conclude an announcement of a new fund without a substantial word of thanks. To the founders and executives who provide the leadership, vision, and heart for our companies – we are here because of you. On behalf of all of us at Volition, we love what we do because we have the privilege to work with people like you. Thank you for your perseverance, fearlessness, and unbridled commitment. We appreciate that your companies are not just companies – they are part of who you are as people. And we are incredibly grateful for the very personal invitation to partner with you on your journey.

To our LPs and investors – we hope that many years from now, you will be able to make one primary statement about Volition: that we did exactly what we said we would do. That we executed on the strategy we said we would execute on. That we generated the returns that we said we would generate in the way that we said we would generate them. That we were the type of people we said we would be from the very beginning. Thank you for your substantial vote of confidence by entrusting your reputation and capital to us.

Finally, to all the Volition team members – thank you for all of the efforts that you make every day to help make Volition’s success a reality. Thank you for going above and beyond when no one is watching. Thank you for not just doing your job but also caring deeply about and taking immense pride in what you do. Job well done. It’s a joy to be on the same team. Onwards and upwards…

This week, we announced a $10M growth equity investment in Pramata. I am very honored to be joining the Board and am excited to work with the team going forward. So, what do they do and why did we invest?

What does Pramata do?

It’s very simple. Pramata extracts key information out of enterprise customer contracts and puts the data into CRM systems so that enterprise sales reps, sales ops, and account managers can have a clean and accurate view about an existing customer relationship. What’s so hard about that? Well, it might not be hard if you are an enterprise with 5 sales reps, selling one product, to 30 customers, on a standard contract. But, what if you have hundreds or thousands of reps, all across the country or world, selling dozens or hundreds of products, to thousands or tens of thousands of customers, with several distinct buyers within the same customer, mostly on negotiated non-standard contracts, with SLAs, addendums, etc.? Well, then it gets very complicated, very quickly. But, that is just direct sales.

What if you throw in channel partners who also sell your products with their own contract structures? It’s even more complicated. And, what if your company is acquisitive, so you are regularly layering in companies with overlapping customers on different contract structures? Then the complexity is nearly impossible to manage. The net of it is for a large enterprise that has negotiated enterprise customer contracts – a single customer relationship can be buried in hundreds, if not thousands, of complex and ever-evolving contractual documents.

When that’s the situation, it becomes incredibly challenging to answer seemingly very simple questions that sales reps and account managers want to know such as:

What products or services has this customer bought?

How much does this customer spend and on what?

What are key dates, milestones, expiration periods, etc. on their contract?

How much are they paying and what discounts are in effect?

Are there any non-standard terms or overlapping agreements?

It becomes even harder for sales ops to have visibility across their customer base to answer important questions like:

Which customers are expiring in the next 6 months?

Which customers bought x product, so we can focus on upselling y product?

Which customers have non-standard pricing?

Having a clear view into a customer relationship has very practical implications. Account managers know when to approach customers about renewals or products to upsell. New reps can get up to speed quickly on existing customer relationships. Bills can actually be right (which is a bigger problem than meets the eye). Pricing and utilization can be optimized across a customer when you have a holistic view into the relationship. Net net, having a clear view of customers can have direct and profound revenue and productivity implications for enterprise sales teams.

Why Did We Invest In Pramata?

There were lots of really important reasons why we invested in Pramata, and then one indispensable reason.

Among the really important reasons:

Great Product-Market Fit. We really believe the problem Pramata has identified and the way they solve it can provide tremendous value across a broad cross-section of enterprises. It’s a big pervasive problem that they have cracked the code on solving.

Blue Chip, Highly Recurring Customers. It’s not often we see a company start at the high-end of the market – winning the biggest and best brands first. Industry leaders like Cisco, Medtronic, Centurylink, FICO, Comcast among many other customers provide great validation for the value of the product.

Nirvana Customer Feedback. The before Pramata/after Pramata feedback from existing customers was not just good – it was described as a game-changer. A number of customers talked about how Pramata is the single-most important vendor that the sales team works with.

Proven Delivery Model. They can deliver the goods. They give customers a great customer experience. They live up to their promises. They do what they say they’re going to do. Their delivery model has been refined and hardened taking on some of the largest companies in the world.

Strong growth. Of course, this is indispensable for us as a growth equity investor – but the company is experiencing strong growth as the market becomes more aware that the solution exists. We certainly expect that our investment will drive even stronger growth ahead.

But, the most important reason we invested was apparent the very first time I met with Praful Saklani, CEO, well over a year ago – philosophical alignment and shared values with the management team. From the very first time I met Praful, and met other members of the Pramata team, it was very clear to me that we think alike and share common points of view on how to build a business. We share an old-fashioned sensibility that businesses should be built off of delivering real value to happy customers, egos should be checked at the door, and we should do right by the people around us. My reaction the first time and every subsequent time I’ve met with the Pramata team is this is a Volition management team. And, I’m thrilled to make that a reality today.

Many venture capitalists shy away from e-commerce due to Amazon’s dominant, market leading position. The concern is that Amazon can kill any upstart e-commerce company and doesn’t always operate in economically rational ways when they want to win. While there is truth to being concerned about Amazon in this market, the reality is there are some segments of e-commerce that have characteristics which make it more defensible versus Amazon. Given the size, scale and growth of e-commerce more broadly, the winners in these other segments can still be billion dollar companies in their own right. That’s why Volition has made a number of e-commerce investments and will continue to look for strong growth companies in this market.

Here are some of the segments that have better embedded defensibility from Amazon’s competitive threat:

Vertical Commerce: Sometimes product knowledge and merchandising is key. It’s true in offline retail and is true in online retail. Companies like Chewy.com (pet food), Wayfair (home goods), Fanatics (branded sports) are following in the footsteps of Zappos (shoes) by building dominant vertical e-commerce companies.

Full-Service: E-commerce to date has been a self-directed experience. You know what you want, and you go buy it. But, not all consumers are self-directed – some need advice, especially in the apparel segment. Hence, stylist-enabled e-commerce is growing aggressively. Stitchfix is leading women’s mid-market and may be the next $1B e-commerce company. Bombfell is leading the men’s mid-market segment. And Trunk Club led men’s luxury prior to being acquired by Nordstrom from $350M.

Rental: Not everyone wants to buy, some want to rent. That’s a very different fulfillment back-end and user interface than traditional e-commerce. Rent the Runway is one of the leaders in women’s luxury, but others like TurningArt are doing well in art.

Subscription: While Amazon is trying to make more inroads into subscription e-commerce, they are still more likely to be viewed by customers as transactional. But, the consumables category is made for subscription and has spawned some leaders like Dollar Shave Club (shavers), Honest Company (soaps, etc.), Chewy.com (pet food), Blue Apron (meals), and many others.

Custom Products: While Amazon sells off the shelf products, there’s a large market for custom made products. Billions are spent each year on custom products from t-shirts, mugs, photos, etc. Companies like CustomInk and CustomMade are building promising businesses in this segment.

Clubs: Different business models can lead to different market leaders. In the offline world, there’s Wal-Mart as a traditional retailer, and there’s Costco as the membership-based retailer. In the online world, there’s Amazon as the traditional e-commerce player, and there’s potentially Jet (and others) leading the membership-based model.

Perishable: Does Amazon want to store and fulfill perishable food? Maybe, maybe not. That’s led to an opening for the home delivery of ready to cook meals. Blue Apron started out fast in this segment, but many others like Plated, HomeChef are coming on strong in this market which will not be winner take all.

Full Stack Commerce: Amazon generally resells other manufacturers products. But, these companies vertically integrate in their product category to be able to offer customers a fundamentally different price to value experience. Warby Parker is well known in glasses, TheBouqs (flowers) and others have emerged.

Flash Sale: A new model is hard for an incumbent to react to – such as the flash sale model marked by deep discounts of limited inventory products. Zulily, RueLaLa, Gilt Groupe and others have built valuable businesses leveraging this model which has largely eluded the traditional e-commerce companies.

The channel shift from traditional retail to e-commerce continues to be one of the largest, most predictable secular shifts in the technology industry. Amazon has been and will continue to be the dominant leader in e-commerce, but there will be valuable leaders created in other segments of e-commerce as well.

My sense is most entrepreneurs feel like they have to have a $1B+ market size for investors to get interested. And, then the more aggressive entrepreneurs, knowing that everyone else has at least a $1B+ market size, come in with the $5B-$10B+ market sizes. The means to arrive at these numbers is usually to take a generous number of possible customers and multiply that times a large spend per customer to equate to the multi-billion dollar “addressable market size“. Others might site 3rd party data sources which is intended to lend credibility to the analysis, but which are largely derived by the same methodology. It’s this approach to market size analysis which I don’t find particularly useful and can generate a false sense of comfort if you actually believe it.

When I’m looking at a prospective investment in a company, here’s how I think about market size:

The first question I ask is how much revenue do the companies that sell principally the same product or service generate today. This is the “current market size“. For example, when we invested in Ensighten in 2012, which started out as a tag management vendor, if you added up all of the revenue (from tag management software) of all of the tag management vendors, the total would have been less than $30M, but with hyper growth. That, in my mind, was the current market size for tag management. It was a small number because tag management was a new market rather than an existing market. Alternatively when we invested in Globaltranz in 2011, which is an Internet freight brokerage, the revenue of all of the companies that broker freight capacity in the US was $127B. It was a much larger current market, but with more moderate growth given the maturity of the industry.

It’s important to establish the current market size because it helps to establish whether the company is going after a new or an existing market. If the current market size is small, such as tag management was two years ago, that’s not a deal killer by definition. It just means you have to develop strong conviction that the market will grow and appreciate the inherent risk with that. Lots of investments fail because a new market doesn’t grow at the scale or pace anticipated. If the current market size is large, but not experiencing hyper growth, such as in the overall freight brokerage industry, that’s also not a deal killer by definition. It just means you have to have a crystal clear rationale on why market spend will shift towards a new upstart rather than stay with the incumbent. These are important and fundamentally different questions.

The next question I then ask on market size when evaluating a company is how much revenue, in aggregate, will all of the companies that sell principally the same product or service generate in the future (5-10 years from now). I think of this as the “attainable market size“. When you define a market size by the aggregate revenue of the competitors, it immediately juxtaposes market size against market leadership. For example, if an entrepreneur wants to say their company will have a large multi-billion dollar attainable market (e.g. $5B in 5 years), but their company “only” projects $50M in revenue in 5 years, then it begs the question why 99% of the spend in the market did not go their way. You can claim a large attainable market, but it becomes harder to claim market leadership with little market share. Alternatively, if an entrepreneur wants to call their company a market leader by generating $50M of revenue of a $200M attainable market, then it begs the question of whether the product or service has that much value if the eventual attainable market isn’t that large. It forces everyone to think through the realities of how their market will evolve and how their company’s competitive position will evolve alongside that.

Today, Ensighten is one of the fastest growing SaaS companies in the country and Globaltranz is one of the fastest growing freight brokerages in the country. Despite coming from diametrically different current market sizes when we invested, in both cases, the attainable market has turned out to be large and both have established strong leadership positions within those markets. We’ve been fortunate that the stars have aligned for both.

In summary, my biggest issue with the bloated addressable market slides we see day in and day out in company pitches, is we all know that when we fast forward 5-10 years, almost in all cases, the actual aggregate revenue generated by the companies in those markets will not come close to equaling the addressable market size. In other words, the attainable market almost always turns out to be a small fraction of the addressable market. This tells me that the addressable market size slide is too theoretical to actually be useful and should have little or no bearing on an investment decision. For this reason, in my opinion, it is generally the least useful slide in the pitch deck.

Nearly every company pitch I’ve seen covers the topic of market size. And, in every serious internal discussion about a prospective investment, we talk about market size as well. Usually, the primary topic of discussion in both contexts is the size of the market boiled down to an actual dollar figure. Entrepreneurs and investors alike will come up with a very detailed, methodical way, to define the size of the market opportunity. While that’s fine and worth doing, comparatively less time is spent on the topic of whether the market is an existing or a new market – and the associated risks and opportunities related to that. And, the latter topic can be more indicative of the prospects of the investment than the former analysis on market size, itself.

An existing market is a market where customers already spend money buying more or less the same product or service that a given company is selling. That product or service may be delivered or sold in a different way, but at the end of the day, the customer that you’re targeting is already spending money on substantially the same thing. What’s an example of this? Care.com is an online marketplace to find babysitters. People already spend money on babysitters, Care.com is just helping them to find babysitters more easily. This is an existing market. Chewy.com is an e-commerce company for pet food. Their target customers already spend money on pet food. Again, an existing market. Amazon started out selling books, which people already buy. Uber started out replacing taxi services, which people already buy. Globaltranz is an online freight broker for trucking capacity, which companies already buy to ship goods. Square is going after the existing market of credit card processing. Prosper is a peer-to-peer lender, which sounds like a new market, but they’re really selling unsecured consumer loans, which consumers have been procuring for ages. These are all existing markets.

A new market is a market where the end product or service is new – in other words there isn’t really existing demand, but there could be. SpaceX just closed a big financing last week – space travel is a new market for certain. When Google first came out, it was targeting a new market of online search and search engine marketing. There really wasn’t much of an existing market in search at that time, outside of maybe Yahoo and Altavista. Everything related to drones is a new market. Twitter ushered in a new market that had never existed of micro-publishing. Many location-based applications on smart phones (though there are exceptions) are more than likely to be a new market given the technology didn’t exist to do it until the smart phone revolution. Even a lot of the SaaS companies are selling to mid-market companies that never spent money on traditional software applications before therefore making it a new market in practice. New markets abound in the world of venture-backed companies.

When investors and entrepreneurs go after a truly new market – the advantage is usually there are not entrenched competitors so if the market materializes as quickly and dramatically as they hope, market leadership is more attainable. In addition, new markets can grow exceptionally quickly, far faster than existing markets – and a rising tide can lift all boats as the saying goes. So, there is no doubt that you can win and win big in a new market. That being said, the risk one takes with a new market actually emerging is often profoundly underestimated. My guess is the most common reason companies targeting new markets fail is primarily because the market never really emerges at the pace and size that the company and investors expected. You can have great management, a great product, excellent sales and marketing, but if the market isn’t there, then it’s easy for a company to get stuck. It’s hard to have good product/market fit, when there’s no market after all.

When investors and entrepreneurs go after an existing market – the advantage is there’s little or no market risk. You can go into an investment knowing exactly how big the market is, that customers care about the product, that there’s already a product/market fit and customers derive value from what they’re buying. The value of that can’t be overstated. But, the risk of existing markets is there are already companies serving those customers so there is entrenched competition. If existing competitors have substantial customer loyalty or capital, they can be excessively difficult to displace. A new company entering an existing market has to not just be a little bit better, but meaningfully better than existing means of procuring that product to really win. That can be a tall order, but if that competitive distinction exists, there’s a high probability you’re onto a compelling opportunity and success is far more predictable than most companies targeting new markets.

A few companies dominate existing markets while simultaneously opening new markets. A great example of this is Uber. On the one hand, I said that Uber is going after the existing market of taxi services. But, I also said most location-based smart phone apps, which Uber is, are going after new markets. In this example, this is not a contradiction because both are true. Uber started out by displacing the $11B taxi services market. But, why is the company worth $40B? Uber has become so convenient, that they have changed the behavior of how people travel – so they’ve opened a new market as well that may be bigger than the existing taxi market. Certain studies say that Uber’s revenue in the Bay Area is multiples larger than the entire taxi market in the region – which suggests they have both won an existing market and opened up a large new market. That’s a beautiful thing.

So, next time you see a pitch or make a pitch that says the market size is $1 billion – note that not all markets of comparable size are created equal. And, the risks and opportunities of existing and new markets can be substantially different.

It’s only taken 16 years in the investment business for me to discover my favorite value proposition. And, I admit, it’s a boring selection. First, some context. A value proposition is the value a business offers its customer such that the customer decides to buy that company’s product. To be fair, there are many categories of value props that all have great merit and can be the basis of building a valuable company. So, one is not by definition greater than another. But, we all have our predispositions, and I have a positive predisposition for one value prop in particular. I favor this value prop because, if it is structurally sustainable, it can be equally transformative as it is predictable – and those usually don’t go hand in hand. So, without further ado, my favorite value proposition is offering a customer the opportunity to buy something they already buy, but at a structurally lower price. Yes, if the options are better, faster or cheaper – I like cheaper. Why do I like this value prop? Because there’s little fundamental market risk. If a customer is already buying a product, then you know they want that product and that product benefits them in some way. You know they are ready to buy it now because, well, they already buy it now – so you’re not taking market timing risk. Whether there’s even a market or whether the market is here now is a profoundly underestimated risk undertaken by many emerging technology companies. And, in this example, you meaningfully mitigate those risks. Then you layer on top of a large existing market, a very clear reason to buy with you – you’re selling to them the very thing they already buy, for a lower price. Who doesn’t want that? The key to a company with lower price as its fundamental value prop being a good investment, is their basis for having a lower price must be structurally defensible and sustainable. It can’t be that they’re doing exactly the same thing as their competitors, just charging a lower price. That’s the definition of unsustainable. There is usually some disruption in the supply chain or some technology innovation, which they can take advantage of above and beyond their competitors which is why they’re able to offer sustainably lower prices to their customers and quickly take market share of a large existing market. When I look at our current and historical portfolio, where the ingredients of a structurally sustainable lower price value proposition is true, those companies have an inordinate propensity to be worth $1B+ in enterprise value. Xoom went public last year by offering online global money remittance at a lower price than folks like Western Union because they have an Internet front-end. Prosper offers loans to consumers at a lower interest rate because they use the Internet to cut out the banks who take a margin in the normal lending process. Globaltranz offers businesses access to trucking capacity at a much lower price due to the efficiency of their agent network, technology and buying capacity. Cortera is offering business credit data at a much lower cost than Dun & Bradstreet because of its proprietary data acquisition platform. And Chewy offers pet owners high quality pet food at a lower price than bricks and mortar competitors because they have no bricks and mortar. These companies are all taking significant steps in transforming their respective industries on the core value proposition of lower price. While I can easily fall in love with companies that have other value propositions such as convenience, selection, revenue enhancement, service, etc., lower price is a tried and true value prop which while admittedly boring, can be extremely effective if it’s sustainable.